Tesla Stock Rallies To 2-Month High As Musk Pay Package ‘Overhang’ Fades

Topline

Shares of Tesla rallied Thursday to their highest level since late April as the automaker’s billionaire CEO Elon Musk said shareholders approved his controversial $50 billion compensation package, easing some investor concerns about the mercurial Musk leaving Tesla in the dust.

“Tesla is Musk and Musk is Tesla,” one analyst quipped Thursday.

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Key Facts

Tesla’s stock rose as much as 7% to $181, its highest intraday price since April 29, shortly after Thursday’s market open.

That rally’s owed to Musk’s late Wednesday social media post indicating he secured the requisite votes to re-approved a 2018 stock-based incentive pay package previously swatted down by a Delaware judge (the official results of the shareholder vote will likely be revealed as part of Tesla’s annual meeting beginning later Thursday).

Though not many would shed any tears for the world’s richest man losing out on adding a few more billion to his $216 billion fortune, the Musk pay package’s greenlight removes what Wedbush analysts estimate was a $20 to $25 per share “overhang” on Tesla’s share price.

That’s because it helps dispel the notion that Musk will entirely focus his artificial intelligence endeavors outside of Tesla if he does not secure the 25% voting control of Tesla that he desires, with last month’s $6 billion funding round at Musk’s generative AI startup xAI serving as a reminder of Musk’s intense and capital-heavy initiatives away from his electric vehicle company.

“If this proposal went south a lot of bad things and scenarios could have happened including Musk beginning a path to not being CEO of Tesla,” according to Wedbush’s Dan Ives, who is among the most bullish Wall Street figures on Tesla stock with a $275 price target.

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Big Number

$50 billion. That’s how much Musk’s stock options bonus was worth on paper at market open. Forbes discounts the value of the pay package by 50% due to the legal obstacles the record-breaking compensation plan still faces, though Musk is still easily the richest person on the planet.

Surprising Fact

Tesla’s share price is still down 24% year-to-date, even after gaining 10% since Tuesday. That’s far worse than the 14% gain for the S&P 500 benchmark stock index and the 8% gain for shares of the next most valuable automaker, Toyota.

Key Background

In 2018, Tesla rolled out a plan that would award Musk an additional 12% of the company laid out several lofty goals for the company in order to fully vest, including for the roughly $50 billion company to grow to a market capitalization of $650 billion and for adjusted profits to grow tenfold. Tesla achieved all of the stipulated milestones by late 2022 as its vehicles’ popularity surged and its stock exploded during the early 2020s, but a Delaware judge rejected the plan in January, calling the award “unfathomable.” Tesla is amidst an extended financial slump, with its net income falling 23% from 2022 to 2023.